Shangri-La Properties v. BF Corporation
REITERATIONFacts
The Antecedents: Shangri-La Properties, Inc. (SLPI) and BF Corporation (BFC) entered into construction agreement for the EDSA Plaza Project. BFC sued SLPI for P228,630,807.80. The case was stayed pending arbitration as per their contract. Procedural History: BFC filed a request for arbitration, which was dismissed. The Regional Trial Court directed parties to proceed with arbitration under R.A. No. 876. An Arbitral Tribunal was constituted. The Arbitral Tribunal partially upheld claims of both parties, awarding BFC P46,905,978.79 and SLPI P8,387,484.06, resulting in a net award of P38,518,494.73 to BFC. Both parties appealed to the Court of Appeals (CA). The CA partially modified the award, increasing some of BFC's claims and reducing others, resulting in a net award of P47,331,505.30 to BFC. The CA later modified its decision upon SLPI's motion, deleting awards for fixed and provisional attendances and retention money due to prior payment, resulting in a net award of P32,557,274.86 to BFC. The Petition: Both SLPI and BFC appealed to the Supreme Court, assailing the CA's decision and resolution.
Issue(s)
Whether the Court of Appeals (CA) erred in denying BFC's claims for variation works despite alleged written instructions from SLPI. Whether the CA erred in disregarding the agreement between BFC and SLPI and denying BFC reimbursement for damages caused by SLPI's nominated sub-contractors. Whether the CA erred in denying BFC's claim for fire damage and repair works. Whether the CA erred in computing the legal interest on fixed and provisional attendances and unpaid progress billings on the original scope of work only from the date of the Arbitral Tribunal's decision. Whether the CA erred in increasing the award for unpaid progress billings based on the original scope of work. Whether the CA erred in reducing SLPI's award for liquidated damages.
Ruling
The Supreme Court partially granted BFC's appeal and denied SLPI's petition for review on certiorari. The Court reinstated the Arbitral Tribunal's awards for variation orders, modified the computation of unpaid progress billings for the original scope of work, affirmed the deletion of damages caused by nominated sub-contractors, upheld the denial of fire damage claims, adjusted the interest computation, and affirmed the CA's reduction of liquidated damages. The net award to BFC was P52,635,679.70, with specific interest rates applied.
Ratio Decidendi
On BFC's claim for variation works: The Court reinstated the Arbitral Tribunal's awards for variation orders, finding that the letter dated May 9, 1991, coupled with specific SLPI-approved variation orders, satisfied the requisites of Article 1724 of the Civil Code. The CA erred in limiting its review to the sufficiency of the May 9, 1991 letter and disregarding the specific, SLPI-approved variation orders. The Court reinstated the Arbitral Tribunal's awards for variation orders included in progress billings (P9,513,987.91) and change orders not included in progress billings (P6,201,278.50). On BFC's claim for damages caused by nominated sub-contractors: The Court affirmed the deletion of the award for damages caused by nominated sub-contractors. The CA correctly rationalized that while SLPI agreed to facilitate collection, there was no evidence that SLPI actually collected the damages claimed by BFC. Holding SLPI liable for damages it did not cause, without proof of collection, would be factually unfounded. On BFC's claim for fire damage and repair works: The Court upheld the denial of BFC's claim for fire damage and repair works. Both the Arbitral Tribunal and the CA found that BFC adduced no proof that SLPI received fire insurance proceeds. The contract explicitly stated that damages due to fire were at BFC's sole risk, and BFC was only entitled to payment from insurance proceeds, not direct payment from SLPI for repairs. On BFC's claim for re-computation of interest: The Court found no reason to disturb the CA and Arbitral Tribunal's findings that the fixed and provisional attendances and unpaid progress billings on the original scope of work could not be reasonably ascertained at the time of demand. However, considering the CA's adjustment of interest based on an erroneously reduced amount for variation orders, the Court reinstated the Arbitral Tribunal's interest award of P12,382,710.73. On SLPI's claim for unpaid progress billings based on the original scope of work: The Court upheld the CA's increase of the award for unpaid progress billings. The CA correctly found that the lack of Progress Payment Certificates did not negate BFC's completion of the original scope of work, citing SLPI's own letters acknowledging completion and the absence of a Schedule of Defects. The CA's computation of P24,497,555.91 was upheld. On SLPI's claim for liquidated damages: The Court affirmed the CA's reduction of liquidated damages. For Phase I, the CA correctly determined that BFC incurred only six days of delay, resulting in P780,000.00 in liquidated damages. For Phase II, the CA correctly concluded that BFC did not incur any delay, as evidenced by SLPI's requirement for as-built drawings for final re-measurement and the payment of the balance of the contract price, indicating project completion on April 30, 1992.
Main Doctrine
The Supreme Court affirmed the Court of Appeals' modification of an arbitral award, clarifying the application of Article 1724 of the Civil Code regarding written authorization for variation works and upholding the principle that factual findings of arbitrators, when affirmed by the Court of Appeals, are generally conclusive, subject to exceptions.